Feasibility Study Table of Contents Executive Summary2 Description of the Product2 The Problem2 Unique Aspects of Our Model3 Industry Overview3 Competitive Analysis4 Target Market5 Our Place in the Value Chain5 Commercialization Strategy5 Types of Revenue6 Financial Assumptions6 Revenue Model Appendix Executive Summary Peanut Butter has been a household essential, since its creation in the early 1900’s. It has remained a family favorite ever since. Despite its popularity, there has been one reoccurring frustration when it comes to eating peanut butter.This frustration comes about when one reaches the bottom of the jar and takes on the strenuous task of digging for the last bit of peanut butter. Aside from being annoying, it often also results in throwing away jars that have food left in them.

Double Twist Peanut Butter is taking advantage of the opportunity to eliminate these problems brought on by the standard single lid container. Along with a high quality peanut butter, our brand is introducing a new generation of containers that are equipped with lids on each end of the container.Not only does this save wasted peanut butter, it also gives much added convenience to the customer. We are following a common trend of efficiency amongst Americans. We are entering an already established market but we are bringing a new dimension to it with our innovative double sided jar. We are hoping our unique product will help us build brand recognition and ultimately a strong customer base. We are marketing towards a similar target group that our competitors have targeted, however we are able to offer an economically and environmentally friendly container that will distinguish our product amongst the rest.

In 2011 Jif and Skippy were the two biggest peanut butter distributers, these two companies accounted for approximately 52% of the market. Aside from these two there really aren’t any other extremely large peanut butter brands. This leaves a lot of room and potential for new peanut butter distributors, such as Double Twist, to join the market and experience success. Double Twist is unlike any other product in this particular market, its distinctive design will make it easily recognizable and we believe this will result in it quickly becoming a well-known product.Description of the Product Double Twist Peanut Butter is a new brand of peanut butter that comes in a very novel, unique jar.

The peanut butter itself will come in different flavors, and be made up of only the best ingredients. Aside from the actual peanut butter, the container it comes in will simply blow the customers mind. Our peanut butter will be packaged in a jar that can be opened from both the top and bottom ends.

This double ended jar allows the customer optimal use out of their purchase.Rather than taking the tedious task of scraping and scratching the bottom of the jar with a butter knife, now you can simply flip the jar over and open it from the other end, where the ends of the peanut butter sits. Another way to create less waste, our Double Twist Peanut Butter jar is made from recycled plastic and has thinner lids. This fits the ongoing trend of preserving our planet and going green. Not only is our new product, great tasting, eco-friendly, and practical, its unique look alone sets it apart from the standard peanut butter all grocery stores offer.

The Problem A common problem that Americans have come across recently is that we have been wasting food. We haven’t been purposely wasting food, but there are certain instances when we simply have no choice but to throw away good food. This problem occurs most often when you are eating something that comes in a jar, such as peanut butter.

When one gets to the bottom of the jar, they try to scoop up the remnants with a knife but its most of the time it’s just too difficult to do.One can see that there is still peanut butter left at the bottom of the jar, but its either too difficult or too big of a hassle to try and extract the rest, so they usually will just throw the jar in the garbage. Another problem that has arrived when getting to the bottom of a peanut butter jar is that it gets messy. It’s just plain annoying when you are trying to knife out peanut butter from the bottom of the jar and you end up getting it all over your hands from sticking them in the jar.

These are the biggest problems that occur when trying to get peanut butter out of a standard jar.If these problems could be eliminated people would waste less food, ultimately saving them money, and find themselves cleaning up less messes, saving them headaches and unnecessary work. Unique Aspects of Our Model Peanut butter is a household fixture all across America. Although there are different brands and different types of peanut butter, all products come in a similar container. A typical peanut butter jar is a cylinder shape with an easy twist-off top.

They may vary in height and width however it would be difficult to find a single peanut butter product that did not utilize the typical container.While the current peanut butter jar may be considered easy to use, it still leaves much to be desired. Our product would be similar to the current container; however we would include a second twist-off top on the bottom, making it a double sided jar. With two twist-off tops this would allow the customer to be able to easily reach the peanut butter on the bottom of the jar once half of the jar is used up. Currently with the single twist-off top, once you use up half of the peanut butter it becomes difficult to scrape out and leaves your hand sticky and covered in peanut butter.With the double sided jar you are able to create less of a mess and in turn it creates less waste.

Another unique aspect of our product is that with the double sided jar customers are able to utilize even more of the peanut butter contained in the jar. Due to our economy in the United States being in a recession, many households are looking for ways to get the most out of their dollar. By using a thinner lid and recycled plastic, Double Twist Peanut Butter’s double sided jar would be able to effectively capture our target market of families by promoting that our product is not only easy to use, it is easy to recycle, and also reduces waste.Many Americans are becoming more aware of our environment and economy so the fact that we can give them a product that tends to both these needs is what will resonate with our customers and help us create brand loyalty with our product. Industry Overview While peanut butter has its own industry, it also competes in an even broader industry.

Peanut butter is one of many products that can fall under the “bread spread” category. Other “bread spread” products include butter, jams, mayonnaise, and more. A major problem for the spreads industry is that it suffers from slow movement in grocery stores.

This makes the peanut butter industry incredibly vulnerable considering they have to compete with new and more affordable spreads that have since entered the market. Another major problem is the changing breakfast food patterns from breads with spreads to more convenient, instant, and on-the-go products. However the good news is that the market for peanut butter has remained relatively steady in recent years by coming up with creative ideas to stimulate the peanut butter industry. Competitors have marketed to health advocates by fortifying products with Vitamins A, B1, D3, and E.They have also targeted kids and families by introducing peanut butter with stripes of chocolate and fruit jams. Another hope for the peanut butter industry and the “bread spread” industry is the expected growth of the bread industry. Peanut butter is considered a complement to bread, so a growth of the bread industry would directly affect the peanut butter industry as well.

The Peanut butter industry currently has three top brands in the United States; Jif, Skippy, and Peter Pan, respectively. The top three brands in the industry share a lot in common.Jif, Skippy and Peter Pan all focus their brand on being family friendly and wholesome and they all depend on their loyal customer fan base. However, out of the top three, Peter Pan is slowly losing their place among the top peanut butter brands.

Through a salmonella scare and poor marketing in recent years Peter Pan has slowly lost their edge on the rest of the competition. In 1990 the top three brands accounted for approximately 75% of the market share, in 1996 that number decreased to 70%, while the rest of the market share is shared by fringe suppliers who produce generic, regional, and store brand peanut butter.As of 2011, Jif and Skippy held 34% and 18% of market share. This leaves plenty of room for Double Twist Peanut Butter to capture part of the market share in the peanut butter industry. Competitive Analysis Double Twists competitors for peanut butter are mainly the top tier market share holders. These companies are: These competitors all manufacture peanut butter in jars and would prove to be direct competitors to our business. Their greatest strength is brand loyalty.

With brand loyalty they can capture many customers through repeat business.Through this loyalty they have developed a certain image or brand recognition for their product by simply having their name on a product. Since we will just be emerging, we will not have brand recognition and will have to rely on people experimenting with our product in order to gain loyal customers and brand equity.

The competitors’ weakness is they do not offer a double lid jar of peanut butter. This provides us with a unique opportunity to capitalize on an idea that no one has tried yet.Since we will be the first manufacturer of a double lid jar, we will be able to have a jump start on our competition by being able to troubleshoot any problems that may occur before they even start to make a double lid jar themselves. Another group of competitors that we should not overlook is the substitution of another type of spread. Other types of spreads are: Spreads can directly affect how well our product is sold. Many customers use different types of spread on their food and almost all types of these spreads can replace peanut butter.

There is a great way for Double Twist Peanut Butter to capitalize on this weakness. We can turn this weakness into an opportunity by expanding our product lines to consist of different types of spreads using these double twist jars in future years of operation. There exists a hard statistic for Double Twist to overcome. The statistic is that 63% of customers stick with one type of peanut butter product.

This will hinder our ability to generate sales because with 63% of customers solely buying one brand of peanut butter makes the customer base extremely brand loyal.Given the current market on double lid jars to be in the very early innovation stage of its development, this makes us believe that there will be less competition present until double lidded jars market matures. With the less competition of other companies producing double lid jars, we have ample opportunity to capitalize on the customers that want to try our product without having a name brand option to replace our product with. This will help us develop a much needed customer base that will help our company grow into a peanut butter market leader. Target market/Customer ProfileOur target market is families. This target market is pretty vague; however families are primarily the main buyers for peanut butter.

By not fragmenting our marketing efforts to different types of families, we are able to appeal to everyone and not eliminate our chances with some families that we do not appeal to. We instead will concentrate our efforts on the big picture. For the most part, families rely on brand loyalty. Since we are just emerging we will not be able to gain the family market share through brand loyalty. We will have to find a different approach to appeal to families.Thus, we know that many families also rely on convenience. For us, convenience is the greatest characteristics for our unique jars that are made with two lids.

This added convenience factor that our product will offer, will be a great marketing tool to use to target families. Our Place in the Value Chain When thinking about the value chain, our company takes two main factors into account; production and distribution. The production of Double Twist Peanut Butter and the jars it comes in is all outsourced to China. The production costs are accounted for under cost of goods sold or COGS in all of our financial statements.For distribution, we mainly sell our product to grocery stores, in large quantities. Our distribution plan is fairly simple, we plan to increase and further our distribution over a 5 year span, until we are eventually being sold nationwide.

For the first year we would like to get Double Twist in mostly local grocery stores. By year two we plan on being carried in stores all over the state. For the third and fourth years we want double twist to be in stores all throughout Midwest, hopefully over these two years we will gain recognition and a large customer base.And finally by the fifth year we plan to have Double Twist be carried by stores all across the US. Commercialization Strategy A major part of the peanut butter industry is brand loyalty.

63% of customers buy the same brand of peanut butter every time, so in order to capture a part of the peanut butter market we must be able to create a loyal fan base. Our commercialization strategy is to start locally where we will be able to create a strong fan base and then continue to expand to regional and national grocery stores and supermarkets.Because the peanut butter industry is so competitive and their customers are extremely loyal, starting local will be able to allow us to not only test out our product on the market but it also allows us to build a customer base that will stick with us as we expand. By first networking with local grocery stores such as Johns Grocery, Fareway, and Hy-Vee we will be able to reach a lot of our target market in these atmospheres. Once we build relationships with these clients and obtain sales then we can move on to other regional and national brands. Types of RevenueThe main source of our revenue will come from sales revenue.

We will mainly rely on grocery stores to carry our product. We will sell our product to grocery stores at a wholesale value and they will in return mark our product up to our suggested retail price. We will also sell our peanut butter out of our warehouse to customers that want to purchase our product without making a trip to the grocery store as well. Since the grocery store is not in the distribution channel, we will be able to offer our products at our warehouse for a discounted price.

Since we are a peanut butter manufacturer, we will rely on the sales from either grocery stores or customers at our warehouse as our key source of revenue. Financial Assumptions Revenue The number of jars sold each year is the main driver of revenues for Double Twist. This number is estimated based on the demographics of Iowa and the expected outcome of our marketing efforts to grocery stores here in Iowa. The number of sales to new grocery store carriers and customers in the years following the initial startup are expected to increase at an average rate of 54% every year.However, with different marketing efforts and techniques, our competitors’ efforts, and the status of the economy we planned for different levels of growth throughout the first five years of our operations. Cost of Sales Our business model assumes that manufacturing of all peanut butter and jars will be outsourced to China.

We chose China because they were listed as the top producer of peanuts in the world according to the USDA Foreign Agricultural Service. We wanted to keep all production in one area so we decided the jars should be made there as well.The average cost of the product to be produced in China will be 40% of our anticipated selling price.

Expenses Expenses for Double Twist Peanut Butter are expected to be in general operating expenses. These expenses are expected to rise as revenue and production of our peanut butter rise. Over time, we anticipate these numbers to somewhat level off as our company reaches maturity. We initially started with budgeting about 20% of revenue for possible expenses; we then increased that amount as we sold more products throughout the first five years.Funding Double Twist Peanut Butter will fund its operations through equity and convertible long term debt.

We, the founders, have issued $200,000 worth of equity. Additional funding of $800,000 will be issued in the form of convertible long term debt over the first five years at an interest rate of 15% annually. Our friends and family will be the only investors in our convertible long term debt funding. This will bring Double Twist Peanut Butter’s total initial investment to $1,000,000.

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